Long Lease Now, PAY later– by Tom Ames-Waller

The potential impact of a No-deal or even a Deal Brexit has plunged the car market into uncertainty, with many fleet managers extending long lease contracts until the outcome is known.

Whist this is a viable option, it comes at a cost to the bottom line and also brings operational challenges regarding maintenance, tyres, servicing etc.

We appear to have come to a impasse, where OEM’s don’t want to blink first on supply, support agreements and EV’s and procurement teams don’t want to commit to purchases when the same product could be cheaper in 6 months’ time. A historical battle in the fleet world, however one that is now amplified by the uncertainty around the economic climate and volatility on exchange rates.

So what is the best option in this marketplace? How can you tread water until the decision around Brexit is known?

I spoke to a colleague regarding the challenges that SME’s face regarding their fleet options to see what trends are coming forwards:

William Harvey – Regional Sales Manager, Sema Lease UK LTD:

Q) What is the key feedback from your customer base at the moment?A) Existing customers are fairly relaxed about the climate in the industry. We have a very loyal support who buy into the 12 Month product that we offer, and we have the flexibility to extend where needed. We do find that when look around in the market, prices on the longer term deals are creeping up so the benefits of taking a vehicle over a longer period have eroded.

Q) What do you hear when speaking to perspective new customers?A) We have gained lots of new SME customers that have historically purchased their own vehicles and written them down themselves, and due to a lack of confidence in used values have turned to leasing to reduce the risk on assets that seem to be dropping quicker than beforehand.

Q) So why 12 Month business for these SME’s?A) A finance director for one of our customers called me the other day and was very honest, he said “we are only looking to take these cars for 12 months while the market is so unstable, we have decided to wait it out to see where the market is in 12 months!”. It feels a bit like the housing market, where people move into rented accommodation while the house prices level off, and it makes perfect sense really…why buy a depreciating asset or commit to one for 3-4 years when you can have fixed price motoring for the same amount but then re-look at it in 12 Months.

Q) What would you advise to anyone who is unsure about how to procure a vehicle in the current market?A) I always try to give as much information as possible when talking to existing or perspective customers. Make sure that you compare the full life cost of any deal that is put in front of you. If you are looking at a 4 year lease that is cheaper on a monthly basis, then make sure you factor in tyres, servicing, maintenance etc. I also brief them that you don’t want to be stuck in a deal that could then be cheaper 6 months down the line so try and keep flexibility, this is where the 12 month product is so important.

It does feel as though the key focus is on riding out the storm at present. Vehicles are still a key requirement, but ones that are becoming more expensive as the market ambiguity continues.

The key trend seems to be around moving away from purchasing and allowing other funding mechanisms to hold the risk, but with a view to not committing to a price that is fixed for a longer period (2-4 Years) as when used values improve the predictable change will then be seen in the monthly costs, and you don’t want to be paying more than the competition for the same product.

One thing is very certain in this marketplace for the foreseeable future, and that is uncertainty!